When your debt burden is overwhelming, you may find yourself behind on your taxes. Most people have a variety of tax obligations. The three most common are property taxes and federal and state income taxes. Advice on property taxes is found in Chapter 19. This chapter concentrates on back-due federal income taxes. Some of the information here also applies to state income taxes. Resources for getting help are listed at the end of this chapter.
You must give special consideration to your federal income tax obligations. If you can afford to pay the outstanding tax bill, you should do so in order to avoid accruing further interest and penalties. When you owe taxes to the Internal Revenue Service (IRS), the IRS will not ignore this debt, but instead, the IRS will press collection and seek penalties and interest. Outstanding federal taxes may be collected for ten years from the date assessed—a debt to the IRS can have a long life. The IRS also has far reaching authority to collect taxes—it can place a lien on property and levy (seize) property including bank accounts, wages, Social Security, and even pension payments.